160. Would it suggest good value for money if
the 7,000 figure is right? (Mr Macpherson) I am not
sufficiently close to the data to give you an answer on that.

161. How do you measure whether regional selective
assistance was effective or not? (Mr Macpherson) Yes,
it is. That should inform the allocation in the spending review
and I am quite certain it has informed the allocation in the spending
review just finished.

162. How are you measuring the effectiveness
of RSA? (Mr Macpherson) There are a whole raft of different
indicators which can measure it. Jobs is an issue, but it is only
one issue. One reason for that, which comes out in this Treasury/DTI
published last year, is this issue of clusters. It is not only
the jobs in the relevant enterprise which are being supported
but it is also whether there are externalities in terms of promoting
a cluster of related economic activity. Evaluation of RSA is very
important. History suggests that with an ill-thought out policy
of regional selective assistance you can end up spending a great
deal and not get very much in return. It is important the policy
should be framed in a way that is cost effective.

163. Are you not afraid it might be in precisely
that situation. (Mr Macpherson) I am not afraid of
that because I know that these issues were looked at closely in
the spending review and my colleagues in that particular part
of Treasury which deals with RSA would have subjected this area
of spending to considerable scrutiny.

164. It sounds like you doubt Dr Wren's analysis? (Mr
Macpherson) I have to look at his analysis. Would it be helpful
if we provided a note on this issue.

165. I think it might be. (Mrs Dunn)
May I make a general observation just in case you are going to
go on and ask us about the other drivers and what the measures
are.

166. You will be relieved to know I am not. (Mrs
Dunn) It is possibly a point that is worth making anyway.
I have been trying to look through the Spending Review White Paper
and turned to the DTI chapter to look at what that said about
enterprise. There is a more general point, which is throughout
this I think what you would see if you were to look at each individual
departmental programme you would find evidence of policies that
are being persued in support of the five productivity drivers.
In the chapter on regional policy we set out there how we think
some of the other mechanisms will be used to take forward our
spending plans in the way that allocates resources to the regions.
The other thing we say, as we said before, is we have signed up
to a PSA target about improving economies and making sustainable
improvements in all English regions, and so on. Part of the process
of signing up to that is we now have to commit ourselves to actually
having performance against that target monitored in a very public
way, so a lot of your questions were about what we could tell
you now about what success these policies have and the answer
to that is partly that because we are talking about a range of
policies, some of which have a very long run effect, some of which
have a more immediate impact, some which have a broad coverage,
some of which are much more targeted, it is quite difficult to
come up with a single answer to that question. The great advantage
of having a target that we are developing is that we will be able
to come up with some sort of mechanism for monitoring our progress
against that target. Your task will become easier because we will
be able to explain how we are performing against that.

167. You will have targets for say five and
10 years out? (Mr Macpherson) The great thing about
Public Service Agreements is that we are getting a report regularly
on progress against them. I think we plan to have a website up
and running in the near future which will set out what is going
on.

168. If I want to find the answer to my question
about how we are progressing on enterprise at some point there
are going to be clear targets and measurable performances against
those targets? (Mrs Dunn) There are. In fact the PSA
target for enterprise is to help to build an enterprise society
in which small firms of all kinds

169. That is an aspiration. The question is,
how will we know whether we are getting it? (Mr Macpherson)
On the regional target we will know as the regional data comes
out through time when the ONS publish it.

170. Within that data what are you looking at
to see whether we are making progress on the enterprise? (Mr
Parkinson) An increase in the number of people going into
business, improvement in the overall productivity and more enterprise
in disadvantaged communities.

171. Are their targets linked to those variables? (Mr
Macpherson) No.

Chairman

172. You said that the target will be monitored.
It is the Treasury that is monitoring targets? You are monitoring
yourself? (Mrs Dunn) This a DTI target. (Mr
Macpherson) Departments are required to publish progress and
they are required to get independent assurance through the NAO
of the data systems which underpin it. I think they will be pretty
robust.

Mr Beard

173. In your memo you say that the 2002 Spending
Review will reflect the government's emphasis on regional agenda
and build on the analysis set out in the 2001 paper on productivity
in the UK. What new policies were brought in directly to do with
the regional agenda? (Mr Macpherson) As I mentioned
earlier, first there was an increase in resource for the RDAs.
I would identify three areas where I think there was a step forward
in the Spending Review, one is in relation to housing, where there
is a commitment to creating strong regional bodies. Secondly,
in relation to the relationship between RDA and Learning and Skills
Councils, where we are running pilots for creating pooled budgets.
Finally, in relation to the small business service and how that
interacts with the RDA. In those three areas, skills, small business
support and housing I am hopeful that we will make important steps
forward.

174. Taking the first of those, which was the
resource allocation, since April you have been having a single
lump sum allocated to regions according to the formula, you also
incorporated into that a floor so that no one suffers too much
reduction. If you have introduced a floor it is going to take
ages and ages to equalise the amount of money going to the different
regions, is it not? (Mr Macpherson) This is always
one of the issues which arises when you introduce a new formula.
There is a trade off between getting the revised approach in place
quickly and not creating dislocations in the areas you are going
to end up transferring the money. (Mrs Dunn) I think
the floor could be regarded as a transitional arrangement for
exactly the reason that Nick says. I think it would be fair to
add that the formula used for allocative purposes is one that
is agreed by the Regional Development Agencies themselves and
their perception is that it delivers an allocation they feel is
consistent with what they want.

175. That does not make it right if the objective
policy is to try to equalise the productivity or the GDP of the
different regions. First of all, they do not have much statistical
information to go on and, secondly, their objectives may not be
the same as the central purpose. The central purpose is saying,
yes, we are going to re-allocate the funds if there is a problem
there but not very much. It could take a long time. (Mr
Scotter) Our PSA has two parts, one is to improve the economic
performance of all regions and the other is to reduce the persistent
gap between regions. It goes back partly to Mr Cousins question
earlier, some of them, the south east for instance needs resources
from government to help to continue its economic performance which
is of benefit to the United Kingdom as a whole. We are not actually
about trying to hold back the south east, government is not about
trying hold back the south east or London in any way it is about
trying to give the regions that are not at that level of performance
the ability to move forward and catch up. It is right that there
is a balance here and that one gradually may focus resources more
towards particular regions while continuing to keep up support.
For instance there are skills gaps in the south east and in the
east of England which are growing very quickly and it is right
that government through the RDAs and the Learning and Skills Councils
should be doing things to address that. I do not think the fact
that money will continue to go into the south east or the east
of England is a flaw in the process, it is because we are trying
to tackle two things at the same time, one is the growth everywhere
and the other is tackling the gap.

176. I accept that. I am not really talking
about that, I am talking about the disparity between what has
been declared, which is the process of differentiating between
regions so that you allow regions to catch up in productivity
and GDP per head, and the fact that one of the policies that proclaims
itself as trying to do that has a brake on so that it is not really
doing it at all in any measurable time scale. (Mr Macpherson)
I think it is doing something. The direction of travel is clear,
it is just a question of how much dislocation you have in getting
there. As I said earlier there is a trade off here as, no doubt,
there will be a trade off when a new SSA formula is introduced.
Inevitably you cannot please everybody.

177. Do you have any feeling for how long it
will take to get any reasonable equity between regions if you
follow the present arrangements? (Mrs Dunn) Do you
mean just in respect of the allocations to the RDAs?

178. Yes. (Mrs Dunn) I think it would
depend on how you defined equity. The regions have different sizes,
and so on. (Mr Macpherson) I suspect what you are asking
is if you have a formula without floors and ceilings that is where
you are going to end up, it is how long it will take, given the
current floors and ceilings. (Mrs Dunn) Probably one
spending review period.

179. That is how long? (Mrs Dunn)
Three years. I would like to check that I think.